Credit cards offer plenty of advantages for business owners: they can help you keep track of expenses, allow trusted employees to pay for the supplies and services they need, and you can even accumulate rewards that give you free gifts. There certainly are advantages. But what about the disadvantages? Before you get a new credit card for your business, you should know about those as well.
Your Business Credit Cards Could Impact Your Personal Credit History
If you own a company, especially a small business that establishes you as the sole proprietor, then you have ultimate responsibility for your business’s credit card. That is not a problem as long as the credit is used wisely and the bills get paid on time. If you leave those responsibilities to someone else, though, you could find that missed or late payments from your business credit card has harmed your personal credit history.
Business Cards Do Not Offer as Much Protection as Personal Cards
Credit card companies have to follow a lot of federal rules. For instance, they cannot raise their rates unless the card owner has missed payments. More importantly, they cannot harass credit card owners struggling to make payments. The company can send reminders and add penalties, but it cannot have an employee call the card holder and threaten them.
These are good laws that regulate the credit industry and protect consumers from unfair practices. Unfortunately, your business is not protected by the Card Act. When it comes to dealing with your business, credit card companies might not have to follow every rule in the act. After all, rules designed to protect consumers do not necessarily protect businesses.
Should You Use a Business Credit Card?
Business credit cards are very useful, but you have to use them wisely. Do not reach an overwhelming balance that is impossible to repay. In fact, pay your entire balance at the end of each billing cycle if at all possible. Make those payments on time, and keep a close eye on any changes that the credit card company makes to your account. You do, after all, always have the right to eliminate your account and use a company that offers better services.
Photo Credit: J M, Flickr.